IRA Beneficiary
26. Individual Estate Tax Exemption
Estate taxes have come up several times in this presentation. I'd like to take a few moments and explain what they are -- and why you should care.
Estate taxes are different from, and in addition to, probate costs (which can be avoided with a revocable living trust) and income taxes.
When you die, your estate will have to pay estate taxes if its net value is more than the exempt amount set by Congress at that time.
In 2011 and 2012, the federal estate tax exemption is $5 million, with a 35% tax rate. If Congress does not act again by the end of 2012, on January 1, 2013 the exemption will be $1 million with a top tax rate of 55%. In addition, some states have their own estate or inheritance tax, so your estate could be exempt from federal tax and still have to pay state tax.